What trends do Montréal financial analysts see for 2021?

Analysts are almost unanimous in their view of demand for green policies exacerbated by the pandemic

What trends do Montréal financial analysts see for 2021?
Steve Randall

The pandemic has intensified investors’ interest in green policies and ESG factors according to financial analysts.

A survey of Chartered Financial Analysts (CFA) members of CFA Montréal found that 92% expect a greater demand for green policies and that ESG factors will play an increased role in investment decisions.

The past year has focused investors’ minds on how globalization and how the pandemic may have changed supply chains.

"Nearly 70% of our members envision less dependence on China for global trade and more relocation, due to supply chain issues and de-globalization, among other reasons,” said Carl Robert, CFA, president of CFA Montréal. “It will be interesting to observe the evolution of the buy-local trend in relation to the anticipated strong demand for green policies in investment decisions for the economy.”

The survey also shows that analysts are confident in the continued strength of the financial sector and a return to pre-pandemic employment levels within 12-24 months.

“That would be a faster recovery than in the economic crisis of 2008 to 2010. In the meantime, our members will focus on two things: investment diversification and resilience," added Robert.

Best returns in 2021?
Asked about asset classes, where do analysts see the best returns in the year ahead?

Public equity markets (46%) and private equity (38%) were the top answers.

Information technology (40%) and health care (29%) remain the most attractive equity sectors, while the fixed income (51%) and real estate (49%) markets will be most affected by the pandemic in the coming year.

Among institutional investors, respondents expect a reduction in the fixed income weighting of portfolios, and a greater move towards infrastructure, private debt, equities, and real estate.

Other takeaways

  • 90% believe that the massive intervention by central banks in financial markets following the financial crisis and in the COVID-19 crisis has artificially inflated asset prices.
  • 94% of respondents believe that central banks' highly leveraged balance sheets will remain so in the medium term.
  • 46% expect it will take between 12 and 24 months, and 28% between 24 and 36 months, to return to pre-pandemic employment levels.
  • 60% of respondents felt that investors' portfolios were properly constructed to weather the crisis.
  • 65% believe that Canadians' personal income tax rates will increase, with 54% expecting this to occur in between 12 and 24 months.
  • 73% expect U.S. corporate income tax rates to increase, compared to 49% expecting increases in Canadian corporate income tax rates.